The Effects of CEO Affectivity on Firm Strategies: Three Empirical Essays

Student thesis: Doctoral Thesis

Abstract

This thesis contains three empirical studies examining the role of CEO affectivity in organizational outcomes. The first essay grounds in the upper echelons theory and stakeholder theory, and establishes a link between CEO affectivity and corporate social responsibility (CSR). Extant studies on CSR from the upper echelons rarely encompass the role of CEO affectivity, which is one of the most important individual personalities. This study first develops the theoretical argument that CEO positive affectivity positively relates to a firm’s corporate social responsibility, whereas CEO negative affectivity negatively relates to a firm’s corporate social responsibility. This study then explores how the CEO long-term pay structure and CEO career horizon moderates these relationships. With a longitudinal dataset of S&P 500 index firms for the period between 1996 and 2014, the results support the hypotheses. I discuss the implications of the results for upper echelons theory and CSR research.

The second essay discusses the moderating role of CEO affectivity on the relationship between CEO underpayment and firm’s temporal orientation in investment choices. This study, based on the equity theory, first proposes that underpaid CEOs make shorter-term investments as a method to increase short-term performance and restore their compensation fairness. I then investigate how CEO affectivity influences CEOs’ sensitivity to equity and therefore the impact of CEO underpayment on firm’s temporal orientation. The empirical results support the hypotheses. The findings of this study provide implications for the justice literature, research on corporate governance, and CEO affectivity.

The third essay examines the role of CEO affective ambivalence in reducing the size of premiums paid for an acquisition. Based on the law of requisite variety, I propose that CEO affective ambivalence expands CEOs’ cognitive complexity and improves their decision quality, thereby reducing acquisition premiums. The relationship between CEO affective ambivalence and acquisition premiums is further weakened by the business similarity between the acquirer and target and strengthened if the acquisition is cross-border versus domestic. Analyses of S&P 500 companies during the period from 1996 to 2014 largely support my theses. The findings of this study provide implications for acquisition research, research on CEO affectivity, and managerial practice.
Date of Award1 Sept 2018
Original languageEnglish
Awarding Institution
  • City University of Hong Kong
SupervisorHaibin YANG (Supervisor) & Zhiying Liu (External Supervisor)

Keywords

  • CEO affectivity
  • CEO affective ambivalence
  • CSR
  • acquisition premiums
  • upper echelon theory
  • the law of requisite variety
  • CEO underpayment
  • temporal orientation

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